Bank of England chief economist Andy Haldane has stepped up his case for an overhaul of UK corporate governance with the publication of a surprising new speech.
In the previously unpublished speech, first delivered at the University of Edinburgh in May, Haldane argues for a “fundamental re-rooting of company law” to challenge the “shareholder-centric company model” and encourage firms to focus on long-term investments.
“The stakes – for companies, the economy and wider society – could scarcely be higher,” Haldane said, suggesting that more needs to be done to align executive compensation with company performance.
In the speech, the economist pointed to France – where investors who hold shares for a longer period of time have more voting rights than short-term shareholders – and the United States – where some companies use different classes of shares – as examples of models the UK could follow in reform.
The speech’s publication came less than one week after Haldane told the BBC that companies are “almost eating themselves” by prioritising shareholders.
The latest intervention drew criticism from some business leaders. Matthew Fell, CBI director for competitive markets, said: “Moving from a one share one vote approach has previously been considered and shown to have lots of unintended consequences, like making companies less open to challenge and less agile in takeovers. The key is to ensure we have more engaged investors, not just long-term investors.”